US 2020 Election Investment Pulse: Policy and Pandemic Drive Macro View

We’ve seen aggressive government and central bank support to stimulate economies sickened from COVID-19 slowdowns, but will the global economy right itself in 2021? Templeton Global Macro CIO Michael Hasenstab and Francis Scotland, Director of Global Macro Research at Brandywine Global, share their macro outlook for the year ahead. They opine on whether the glass looks half empty or half full as the world eagerly awaits a vaccine and as US policies shift amid a change in administration.

Here are some highlights of their conversation:

  • “We [the United States] have a very divided country. It’s divided across racial lines, income lines, geographic lines, urban-rural lines. The next administration’s biggest challenge is how can we find the middle ground to create compromise to actually pass policy. And even when we look not just between parties, but within parties, it’s very clear from the voting preferences that there is not a consensus within each party as to what the economic, what the social trajectory should be. So, I think that is going to be a challenge—hopefully an opportunity.” – Michael Hasenstab
  • “In some ways we are replicating the last pandemic almost a hundred years ago. We had a pandemic in 1918 and that was followed by the roaring twenties, and my sense is that this is going to play out again…we’re going to have another set of ‘Roaring Twenties.’ The reason I say that is when I look…at all of the classic macro factors that you’d normally look to predict, or to anticipate how things might flow—the lag effect of declining bond yields, the low level of energy prices, the cumulative effect of past policy stimulus, the high personal savings rates that exist in the United States, in China and in Europe—it’s just like a well of potential spending power.” – Francis Scotland
  • “If you look over the last year, there was huge carnage—corporate sector, in the household sector—and that has really been obscured or blanketed over with this big fiscal spending… obscured sometimes the damage that’s happened. How long can we continue to spend this magnitude of money before you get self-sustaining recovery? I think that is a big question. The concern is that we tend to just rely upon spending money as a solution, as opposed to structurally dealing with the issues. Fiscally, we don’t have that type of room.” – Michael Hasenstab
  • ”The Trump administration has very aggressively challenged China on a lot of different fronts. The rhetoric may die down a little bit, but my sense is that the substance of the issues that the United States has with China and the world…won’t change. How we resolve them will be a different question. The Trump administration used tariffs and restrictions extensively in terms of trying to create change. It remains to be seen how aggressive the Biden administration would be in those circumstances.”- Francis Scotland